A Brief History of the ‘Stash: How we Saved from Zero to Retirement in Nine Years

I have been asked many times to provide some more gritty details on how I became Mr. Money Mustache at such an early age. Commenters and email writers have asked me to provide Salaries and Savings amounts through the years, as well as describe any windfalls or unusual maneuvers that made it all possible.

I have hesitated to share the details until this point, mostly because I didn’t keep a written record through the years and it seemed pretty complicated and imprecise in my mind. Also, it’s embarrassing to walk around in your monetary underwear in front of thousands of people. But fuck it, many financial bloggers have graphs of their net worth right on the front page, so the least Mr. M. can do is provide a vague summary of some ancient history.

And for my own benefit, it is worth sorting things out just for the record, so doubters can be convinced, voyeurs can be entertained, and aspiring Mustachians can compare their own progress. So here it is, my best effort at retelling the story. From the fresh-faced new graduate in the earliest days of the Internet, right up to the leathery and bossy carpenter with grey hairs in his beard that types for you today.

Year 0 (1997): The Full-time working career begins. Mr. Money Mustache has just finished a grueling computer engineering degree and is now ready to party. He gets right to work in early May, skipping even the University graduation ceremony because he does’t want to miss any work (he had already moved to a new city 300 miles away from the university).
Age: 22
Starting Salary: $41,000.
Student Loans: Zero – due to low spending, about $10k of help from parents and scholarships, and good high school and summer jobs.
But also absolutely ZERO net worth. No bank balances, never owned a car, just a bike, a backpack, and a diploma.

Year 1: In this first year I foolishly started out by buying a 3-years-new 1994 Ford Probe GT sports car for $16,000 with tax. And I borrowed money from my older sister to do it (what a clueless young man!!!). It took most of the first year to pay off that loan. I also flaunted my new salary around town with frequent bar-and-restaurant-hopping, purchases of computer equipment and furniture, accessories for my car, and a trip to a resort in Mexico. Fortunately, I did enroll in my employer’s retirement savings plan. I also worked like a crazy company slave, enjoying weekends and late evenings in the office. Because of this, and a rising tech market in general, I got a raise to $57,600 at some point in the first year, resulting in a Year 1 ‘Stash: $5000 (in a retirement account).

Year 2: Through both of these first two years, I lived with roommates by sharing a series of nice houses, which we called Nuthouse 1, 2, and 3. The rent averaged about $350 per month, plus some negligible share of utilities. With the unnecessarily expensive car paid off and the higher salary, I was able to save more: $5000 into the retirement account, $3000 into an employee stock purchase plan, and $10000 in cash. Year 2 ‘Stash: $23,000 ($13k cash/shares, $10k retirement).

Year 3: This was late 1999, and both the job and stock markets were on fire. I got a new job and moved to the United States for a salary of $77,000. I drove the ol’ Probe GT down to Boulder, Colorado, and used the local newspaper to find another nice roommate situation, so my rent was only $400/month. I decided to buy a house – but was disappointed to learn that I would need $47,000 in cash for a downpayment on a starter home, which would cost a minimum of $235,000. I cashed out the stock purchase plan shares from year 2, which were now worth $10k, and saved up a few of my new higher paychecks. After a few months in the new job, I had the $47k downpayment. By that May, I closed out the year by moving into my first house. Year 3 ‘Stash: 67k ($47k home equity, $10k retirement, $10k cash).

Year 4: At this point, my future wife finally graduated from her longer and more meandering education up in Canada and decided to join me in Boulder. She drove down in her 1993 Civic hatchback, and hunted for a job. She found one for $44,000. And I was recruited to another nearby high tech company for the ridiculous salary of $83,000. Now things were getting crazy in the income department, although we weren’t thinking about early retirement yet. During vacations, we toured much of the US including Hawaii, and took a trip to Australia and New Zealand at some point too. I saved 20% of my salary into the 401K and got a $5k match from the company, as did the girlfriend. We both started Vanguard accounts to capture any extra cash. We also made some extra mortgage payments occasionally. Year 4 ‘Stash: $150k

Year 5: We were still hard-working Career Beaks at this point, so we both scored raises. I earned $100k including company bonuses, and she earned $60k. I was also working heavily on the house renovations this year. We hosted many great parties at that house, and life was grand. This year, I foolishly took a $10,000 step backwards by buying a brand-new motorcycle with some of my easy-earned cash. But the investment gains on stocks started accumulating, adding about $10k to our earnings this year. So we still ended up increasing the savings by close to $100k after tax. Year 5 ‘Stash: $250k.

Year 6: Salary went up slightly because of an unexpected company bonus, and girlfriend earned a raise to $65k as well. AND, we didn’t buy anything silly this year. In fact, I finally wised up and sold my car, and we became a one-car couple. I didn’t miss the second car for a moment. Investment gains on the existing savings contributed another $20k. It is complicated to remember what portion of income was taxable salary, and what was non-taxable gains inside of retirement accounts and such. But a reasonable estimate of the total is Year 6 ‘Stash: $365k.

Year 7: No increases in salary, but similar amazing earnings and moderate spending, combined with $30k of investment gains. Year 7 ‘Stash: $490k.

Year 8: A raise to $70k for the now-wife(!). Meanwhile, I actually switched to 4-day-per-week work this year in exchange for a 20% pay cut – my first test of the waters of early retirement. But it was still a bumper year for me due to cashing out stock options, stock purchase plan, and annual bonus. My earnings must have been something crazy like $125k this year. Investment gains $40k. Year 8 ‘Stash: $600k.

Year 9: I quit my job!!! And I start a small house-building company as a semi-retirement job. It earns me about $50k in the first year, and wife still works for part of this year until the baby comes, earning $60k. In addition, we move to a new town and buy a cheaper house, renting out the first house for a very high positive cashflow due to a low mortgage and its increased value. At this point in the accounting, we will add in the appreciation of this house – which is about $100,000 after subtracting for the cost of the materials I used to renovate it. About $50,000 of this was due to market appreciation, and 50k due to renovation appreciation. Investment gains continued at about $35k. Year 9 ‘Stash: $720k.

Sometime during Year 9, we declared ourselves as “Retired!”, as we quit full-time work to care for the baby. The rent from the previous house was more than covering the mortgages on both houses. However, part-time work also trickled in after the first few months of baby raising. Eventually we moved one more time to our current house and had two rentals. Eventually both rentals were sold and the gains were put elsewhere. And I became even wiser and sold my motorcycle, to free up both cash and garage space for my greater love: my workshop. Year 10 ‘Stash: 800k or so

Mixed in with those later years, but left out for clarity, was this house-building business of mine. It was a firecracker of success in the first year, then a firehose of disaster in the second year. I’ll save the details for another time, but the end result is happy.. I’m just stuck with one newly-built house that is tying up a certain percentage of our retirement savings, while yielding a nice $2400 in monthly rent. Nowadays I do not build full houses and try to sell them – I closed the old company and the Mrs. and I started a cozy new two-person company that does whatever we want it to do. Custom renovations and finish work only for local, nice people on my side, and Real-estate sales for local, nice people on her side. This low-stress career agrees very well with us, and keeps me from sitting on the couch typing to YOU all day.

Some people will say, “But Wait! You just said you still work sometimes! That’s not retirement!”. To these people, I can only say, “You’ll see”. Because when you quit your corporate job, you end up with even more energy, which means you want to do more stuff! If some of this stuff happens to earn you money, so be it.

I define us as Retired, because that is a novel word to throw around for those under 50 that sounds much more interesting than “Financially Independent”. Also, the cashflow from investments is much higher than our spending.. so work is only done for fun and on our own terms. For example, this year I stopped taking on carpentry work altogether for most of the year and just started typing this blog and doing other unpaid work like school volunteering. Other years, I may accidentally earn hundreds of thousands of additional dollars by starting another company. Who knows!? Even then, Mr. Money Mustache will still be retired, so there.

Since year 10, several more years have passed, and because the rental housepays all bills and we still do some work on the side when the boy is in school, the investment gains and income have just been building on themselves. We also paid off the mortgage on the primary house.

So.. even if we refuse to let ourselves do any more enjoyable part-time work from this point onwards, at some time in our lives we will either have to drastically increase our spending, or more likely, do some generous and worthwhile things with the surplus money to put it to good use.

Isn’t that weird? That I would rather give money away completely, than spend it to hire a bunch of guys with noisy gas mowers and leaf blowers to cut my lawn for me every week so I could sit inside and watch them? Yes, folks, I point this out to show how frugality can grow on you, to the point that you’d rather live an efficient and self-sufficient life even if money were not an object.

I’m sure the questions will come about where these investment gains came from (I don’t remember exactly, but I do remember doing a bit of accelerated buying of the S&P500 during the big tech recession in the early 2000s, as well as a few buy/sells of Cisco stock when it went down to $7 and subsequently recovered to $30). Most of it was just plain old dollar-cost-averaging and dividends. And the amount saved from capital gains is still small compared to the amount saved from old-fashioned not-buying-things. The fundamentals of this plan mostly involved the two of us living on a shared $30-40k of spending money per year, including housing costs, and saving the rest. The biggest single factor producing this low living cost was probably deciding to live close to work and not commute excessively by car.

Other people will scoff at the high salaries involved, compared to the US median level. I won’t deny that – we had it easy, which is why we retired in our early thirties. But many people I currently know earn much more than us, and software engineering salaries are much higher than they were when I quit. I may have lucked out on the tech boom, but people working in high-tech today are lucking out even more. Yet many of these people don’t even own their cars, let alone their financial future. So I still think it is worthwhile sharing these details. More normal salaries, of course, would require some adjustment to this plan. You might decide to settle down in a house that costs less than the $400,000 that is tied up unproductively in my current house, for example. Or you might decide to work as late as 40 or even 45! But in almost any middle-income situation, retirement is something that can be earned drastically earlier than age 60-65, if you start early enough.

* Photo: the spiral stairs leading to a third-floor loft on one of those houses I built. Photo credit goes to friend Intiaz Rahim who whipped up a very fine series of pics during a visit in 2010.

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Very impressive. It is crazy (in a good way) how once you pay off debt and start making those little employees work FOR you it can add up. We’re not as far as you, but even with buying a bigger house in 2009 and my wife staying home to tend to the little ones starting last summer we are still saving 20-25% of my salary. When she returns to work in a few years we have a goal to pay off our mortgage within 5 years. We sat down to run the numbers and plot our long-term financial domination and it was amazing to see what 2 normal middle class people could accomplish. Contrast that to a client I just met who is making $400k and “has nothing to show for it”.

I have said that too – when I build things these days, I feel very similar to the way I did during really focused days of software development. The mental process of problem solving, while trying to pace yourself to balance the excitement of getting things done quickly, with the restraint of going for maximum quality and tidiness, is almost the same!

I can’t believe almost a year has gone by. I’m following your route, and about to close on my first place. 360K, 20% down. It’s a 600 square foot 2 bedroom in Boston. I’ll rent out the other bedroom to a friend, and net monthly cost with a 15 year mortgage will be the same as I’ve been renting for.

Year 2 ‘Stash 99K: 72 cash, 0 Debt. 10K Retirement, and 17K Taxable Trading Account. (The Cash is soon to be converted into Home Equity).

I think it’s important for your young just out of college readers to note that a minimum of two years of continuous salaried work is required to qualify for a mortgage. However, they will let you pre-qualify and begin looking for homes after 1 year and 6 months of work.

I’m looking forward to the compounding effect actually being very noticeable from here on out!

Just stumbled on this comment section. Wanted to say I would be interested in reading your story MiniMMM.

Im actually in a situation now where I just moved and need to work another two years to buy a house as you mentioned. Still building my Stash too of course. Maybe I missed it but did you ever send MMM your story?

Jeremy

MJBNovember 25, 2014, 9:30 am

Medium MM, Nice work! Curious how you got such a huge and indeed fortunate lift on your Taxable Investing stash, between 2013 and 2014… Thanks for sharing!

MimiMMMNovember 25, 2014, 10:16 am

Hi Jeremy and and MJB,

Thanks for your interest in my story. I decided to not share it with MMM yet, as I believe it will be pretty easy for any reader that knows me to figure out that it’s me… That said I may come “out of the closet” next year.

I got very ‘lucky’ in my taxable account in 2013-2014, as I invested heavily in TSLA. It really was fortuitous timing, as I started researching Tesla seriously after the John Broder NYTimes review incident. Built a large position just under $40/share on the assumption that it was heavily shorted, and if it got over $40 it would not look back. Plus, was trading at Enterprise Value of 2x forward revenues at the time, while Ford/Toyota/etc trade at 1x EV/Revenue. Thought I’d happily pay twice the valuation given their growth potential.

A few other good investments as well, to really compound the TSLA gains. Building equally large positions in JBLU and TTWO in Fall 2013. Also, UHAL in Summer 2013. And keep in mind that given how young I am I have a high tolerance for risk, have usually invested about 1.5x Long. Since my account is at Interactive Brokers, I have only had to pay 1.2% interest on the 50% account credit balance. Of course, in 2015 if Fed finally raises rates, as is expected, that could jump to 3%.

Finally, like MMM I chose a career path that front loads your salary (engineering). I paid off 25K in student loans within my first year of graduating. I have been adding aggressively to taxable account via savings, probably about 30K/year.

I’m not sharing so that others try to replicate this success, just to show what is possible. MMM and I diverge on active vs. passive investing, but that is because I have put the time in and am confident that I can make my own risk/reward decisions at a company and portfolio level. I find that while owning index ETFs, I panic and sell low in a correction, as I have no idea about the underlying businesses that I own.

-Mini/Medium/MMM

GarrettAugust 6, 2016, 6:03 pm

What did your 2015 ‘Stash look like, and what about your 2016 ‘Stash?

ArmyColonelKFebruary 18, 2017, 6:31 am

Definitely curious where the MiniMMM ‘stash went for the last two years. Because those are some IMPRESSIVE return results he got with his actively managed portfolio.

But the danger of bold investing – as opposed to the MMM formula of buy and hold index funds – is that while you may indeed make a fortune in good years, you can easily lose it in bad ones.

The big question is: is MiniMMM fully FIRE now, sitting on a beach in Fiji drinking rum punch? Or did he have a bad streak of investing – and now he’s working a second job to build the ‘stash back up?

Which would make him too busy working to keep us updated. MiniMMM, let us know!

Wow, it’s amazing how far you can go with a bit of discipline and no debt to start! I wish I knew back in 1996 what I know now, I would have financed my college education much differently, and spent my early full-time-work years handling money differently too.

Ah, well. Better to become more mustachian in my thirties than never at all, right?

I think that having a savings-oriented mindset is more powerful than your starting position with or without debt. For example, some of my classmates in engineering had higher levels of cash dole from their parents, yet graduated with significant debt.. because they felt that they could afford cars and restaurant meals during university, while I knew I could not yet afford those things (since I graduated with zero net worth, it looks like I spent exactly the maximum amount I could afford but no more!).

If I HAD graduated with $100,000 in debt, it still would have been paid off within a few years.. then the resulting story would just end up having me quit the job after 12 years instead of 9. But many people who graduate with debt go on to start buying additional things once they start a job, which might end up stretching student loan repayment over many more years.

I totally agree. I was pretty frugal when I graduated from college with $11,000 debt (mostly room and board, I was on ROTC scholarship in college). But as my Naval Officer income went up, so did my expenses. I stopped sharing houses and never learned to cook. When my fiance (now spouse) moved to the opposite coast and wasn’t around to cook for me, my expenses got crazy.

When we bought our house and were moving (this was a couple of years after I discovered The Complete Tightwad Gazette), I found a single credit card statement from those days. My bill was slightly over $1000 that month. And it was nearly ALL eating out. Some days I ate out breakfast, lunch, and dinner. Crazy.

We’re pretty savings oriented, but I can’t imagine some of those incomes. I mean, I can, but spouse and I had advanced engineering degrees and several extra years of experience before we saw those kinda numbers. And of course, spending 7 years in grad school doesn’t help on the savings aspect.

The income side of things is crazy in this country, especially in occupations that are in demand.

For example, in Engineering, advanced degrees do not make much difference in income – much more important is which company/field you work for, and how hard and effectively you work. I just read that the NEW-GRADUATE base salary for a Google software engineer is now up to $128k or so.

And even this is a drop in the bucket compared to certain financial jobs in New York City, where the annual BONUS can exceed that amount within the first few years, even while the base salary is higher.

But the bottom line is that getting spending pared down to $30-40k is more important than maximizing income for most people, simply because it’s just as easy to spend $200k as it is to spend $40k. Increasing income is a nice goal too, but the potential rewards vary vastly depending on a person’s field of work and personal abilities.

Meanwhile, Spending Less, Inc. is an equal-opportunity employer and everyone is qualified for an immediate position.

“The income side of things is crazy in this country, especially in occupations that are in demand. ”

Agreed, and am grateful that I chose an in-demand occupation when I decided to go to grad school.

But after reading this article twice, I can tell you it is still depressing for me, and I earn low six figures. Well, only one part is depressing me – the year 5 to year 7 increase, where you nearly doubled your $250K, to $490k.

I achieved a $250k stash this year, but I know even at a 79% savings rate I won’t double it in two years. My only hope to do that is in my micro-cap biotech stocks, which could triple my stash in 2 years. But they also could end up costing me 20% of my stash if their compounds don’t work.

It is just so much easier for DINK mustachians to achieve this kind of impressive stash-building, than for a single person to do so.

On the bright side, even with my killer commute my expenses are only about $20k. (I hate long commutes, but it was forced upon me by the nature of my job when I got hired.) Things have changed, and now I can adjust my commute. Am currently looking to buy a house much closer to work/grocery stores, and start biking!

This is kind of depressing. My salary today is what yours was when you started, and my wife is stay-at-home… although my family’s expenditures are about what your family’s is, not counting mortgage. Hopefully I can still retire within 10 years.

My friend, I just graduated college and I work an hourly for just a hair above min. wage.
I am, of course, looking for better so I am save more in an MMM fashion, but having any salary above the median line is living pretty good.
Here’s to us both making it work! Cheers.

Note that I was nearly 26 when I started working (prior to that I spent all my money on University and a 3-month backpacking trip to Australia). When my job offered me $40K, I negotiated $44 with MMMs advice. :) My top income was $70K when I quit.

We only spent $30-$40K in the good frugal years, so $65K can still get you far. At first you don’t feel like it accumulates very fast, but after a while, if just seems to keep growing… it’s true that MMM made a lot at the time, but like he said, with less income, we would have just worked for 12 years instead of 9.

Plus, we have a surplus now, so we probably didn’t need to save that much. I think the biggest thing we learned is how to be frugal and NOT be consumers. Now that it’s a lifestyle, it’s very easy and comes naturally, and the actual amount of money saved is just gravy…

Yah for a lot of people $40,000 is as good as it gets at the end of 20+ year career. This is a very interesting look into how people who make things work with a more than medium income… I like having something to look forward for.

Ya don’t even want to know how long it took me to get $65k. I hear what some kids are getting out of college these days…I mean, I’m 41, and an engineer with 19 years of experience, a manager, and damn good at what I do…

On the other hand, the economy is fickle. Some kids are getting $70k + out of school, but I just hired an engineer to work as a technician and he’s been jobless since he graduated a year ago.

Thanks for sharing MMM! I was quite encouraged to see that I’m not too far behind where you were 5-6 years out of school! I graduated little later than you did and with student loans, but have been saving every since. It also seems that I picked a bad time to start investing (when the dow hit its peak), but I’m just hoping that means my investments are just better bargains.

Right now I’m saving about half of my income, but a lot of that goes into retirement accounts I won’t be able to access for a long time. How do you maintain your income stream when you retire at such a young age? Is your livable income from side jobs and the rental house or do you tap your nest egg?

You picked the BEST time to start investing! Sure, you were putting money in as the share prices went down, but think of all the shares you were getting on the cheap when it hit bottom. Then all those accumulated shares started to grow for you. While you were buying more on the way up.

Think about the poor souls who wanted to retire in ’08-’10. All the hundreds of thousands they lost that was supposed to be there for them then the market tanked right when they wanted to retire. Let’s hope they weren’t holding too much in stocks in order the lessen the pain.

Congrats on being disciplined and giving yourself the opportunity to retire early. Seems like you and your wife enjoyed some fairly high compensation in your working years. It’d be hard for those less fortunate to accumulate such a sum allowing for such an early retirement.

But the principles stand true. Spend less then you earn, save and invest, keep living expenses low and you don’t have to be a working stiff your entire life!

It sounds like you’ve made some good (and bad) choices, with a mix of luck here and there. As good as your story is, though, that could (and probably does happen) to a lot of other people. The BIG difference, though, (and the reason we read this blog) is that you realized early on that less is truly more. That, I believe, has helped you to not only fully take advantage of your good choices (and luck), but it completely canceled out all the bad choices and then some.

Early on, we are instilled with the idea of having to work and work until you are 65 and THEN (assuming you had enough money) you get to retire. To think otherwise meant that you either were millionaire or were just crazy. You have shown me through your story and blog posts that you don’t have to be either. You just need to be frugal. It is a breath of fresh air, in a consumerist, smog-filled world.

Mr. Poor Player is about to mount his soapbox, so stand back if you must.

From the Pulitzer Prize-winning play “The Time of Your Life” by William Saroyan, written in 1939:

“Listen carefully. If anybody’s got any money – to hoard or to throw away – you can be sure he stole it from other people. Not from rich people who can spare it, but from poor people who can’t. From their lives and from their dreams. I’m no exception. I earned the money I throw away. I stole it like everybody else does. I hurt people to get it. Loafing around this way, I still earn money. The money itself earns more. I still hurt people. I don’t know who they are, or where they are. If I did, I’d feel worse than I do. I’ve got a Christian conscience in a world that’s got no conscience at all. The world’s trying to get some sort of a social conscience, but it’s having a devil of a time trying to do that. I’ve got money. I’ll always have money, as long as this world stays the way it is. I don’t work. I don’t make anything. I drink. I worked hard when I was a kid. I worked hard. I mean hard. People are supposed to enjoy living. I got tired. I decided to get even on the world. Well, you can’t enjoy living unless you work. Unless you do something. I don’t do anything. I don’t want to do anything any more. There isn’t anything I can do that won’t make me feel embarrassed. Because I can’t do simple, good things. I haven’t the patience. And I’m too smart. Money is the guiltiest thing in the world. It stinks.”

It’s important, I believe, to remember that 2/3 of the world’s population will never have anywhere near the financial opportunities detailed in this post, and that if we manage to make money through investment, it means that someone somewhere is working for shit wages, barely able to afford a bowl of rice a day.

Some of us live frugally so we can maximize our own individual financial worth. Others of us live frugally so that we can be sure we leave something out there for others less fortunate to have, and because we ourselves are not as fortunate. The ERE crowd appears demographically to be a young, well-educated, upper-middle-class white community, bent on “beating the system” financially by retiring early (“getting even on the world”), and on the whole it’s driven by good, sound, worthwhile principles. But I fear that often it loses focus on the larger reality, forgetting that its principles are hard to put into practice when you can’t even find a job because systemic economic injustice leaves you chronically unemployed.

If words from 1939 do not ring true to you, read this from Sept. 13th’s NY Times:

There are some nice thoughts behind that speech, but I get a mixed and confused message from it overall.

First of all, earning money from investment does not have a causal relationship with decreasing someone else’s wages. In the purest economic sense, investment is the sole thing which allows an economy to grow – by causing companies to spend on more facilities and equipment, and to hire more workers. Since I have investments, mostly in the US, my actions will tend to make this economy grow faster than it otherwise would. That tends to drive up both domestic and international wages in both the short and the long term, since I am increasing domestic demand for workers, and as a secondary effect increasing trade with other countries.

Now, from the messier political perspective, it is true that international trade has plenty of victims in other countries. And even in our own country, in lower-skilled jobs. But I can’t fix that by reducing my investment in US companies. I can only make attempts at fixing that at the ballot box — can’t I?

If I decided not to invest, and instead to spend all my money on consumption in hopes of avoiding the sins described in the Time of Your Life play, I’d cause a temporary boost in domestic demand, and provide temporary jobs for US workers, or if I bought international products, workers overseas. If I also decided to keep working at a job for my whole life to avoid the sin of not working, I would further boost the domestic economy by producing more goods and generating a profit for my employer. If I was in a high-skill job, my job might generate other jobs.

But I’d be leaving a hole in investment, which would be plugged by higher interest rates, higher foreign capital inflows, and a higher trade deficit. Overall, we do more of a service to our countrymen in an economic sense by Investing, rather than consuming everything we earn. All of this is the kind of stuff that made me excited to recommend Economics Explained in an earlier article.

I also agree with the comment, “You can’t enjoy living unless you work”. I don’t think that needs to be restricted to working full-time for an employer for money. But you need SOME sort of work and life mission and daily challenge of producing things to be happy.

As for the New York Times article – yeah, poverty is up, and wages are stagnant. This is not a byproduct of investment or early retirees either. It’s a product of the Great Recession, which was the product of a spectacular credit and housing bubble, multiplied by unregulated credit default swaps. That kind of stuff, even to a conservative economist, is what you need FINANCIAL REGULATION for. I won’t be fixed by me swearing off my habit of saving :-)

I don’t buy this argument because Mr. MM made the principal for his investments from scratch and because of the unpaid work he does in his family and community (such as with this blog).

1. The basis being earned through labor: I do buy your argument, though, in cases of inherited wealth or where people are being overcompensated for their “labor” because of a type of intimidation process because of the position they hold in a company, for example. Does the CEO of any company deserve more than $1 million per year in wages, for example? Even if the stock price rises a lot, the increased value of the company was earned by (a) the work of all the people at the company, (probably to varying degrees among them, however, just not the stark contrast in which the CEO’s work is seen as many multiples more valuable) and (b) the resources that the company decides to acquire (like the Apple COO’s foresight to capture a large supply of some natural resources needed in making their products).

I don’t think Mr. MM was overpaid for the engineering work he did (although I am concerned that his wife was underpaid). He did the work to earn the difficult skills that the degree represented and then he applied those skills.

2. Unpaid Work Allocation: One other big factor is the extent to which people do the unpaid work of their lives that cannot be done by others, for example, the role of parent, which many try men shift to women. In the child’s eyes, and in the child’s needs, there is no way this work can be shifted – even if children don’t have the vocabulary to articulate this or the autonomy to feel safe articulating. When people do this shift, the problems show up in conscious and subconscious issues in the children, which often get further passed on to additional generations of children or to society in general in the form of need for social services, prisons, etc.

By shifting the unpaid work to a wife, a man can earn more money but he is doing so at a cost to his child and to society that is unfair.

Mr. MM does half the unpaid work of raising his child, according to the book Equally Shared Parenting, so his earnings (and his wife’s earnings) are being accomplished without imposing those costs on their child – or society.

______________________

My only real complain about Mr. MM is that his wife is called Mrs. MM. I think she needs her own name, or better, yet they need to go by a hyphenated or hybrid name together and give their child that name. For example. Mr. Money Mustache married Ms. Money Maven and they became the Money-MaveStaches; now they are Mr. Money-MaveStache and Ms. Money-MaveStache.

Bwahaha, ND! Your thoughtful and informed analysis from a feminist perspective will get you nowhere here! The Money Mustache family exists on a higher plane where such social values are duly taken into account and respected, but then wrapped up into a more complex and nuanced presentation because we are SILLY!

I shared your question about our names with Mrs. Money Mustache, and here is what she said,

“Ahh.. but how does ND know that Money Mustache is not MY last name, and that Mr. Money Mustache didn’t take his name from ME? I think she was writing from a very male-biased perspective.”

For the record, we do have separate last names in real life. And Also for the record, MaveStashe is not as funny as Mustache. For the purposes of this blog, funniness ALWAYS wins, in the sole judgement of Mr. and Mrs. Money Mustache ;-)

Haha! Mrs. Money Mustache suits me just fine, thanks. It’s the name I have chosen for myself.

In real life I kept my last name (just as my own mother did) and our son has his dad’s last name. Of course, this was discussed in advance and this is what we agreed on — personally, I’m not a fan of hyphenated last names. Too complicated.

MMM is very open minded and even considered taking MY last name when we got married! So, enough of this silliness. We’re all equal partners ’round here.

Hahahaha! I’ve been reading this blog front to back and THIS entry/comment is the first one where I felt compelled to chime in. My last name is my maiden name and husband has his last name. I also dispose hyphenated last names so our Daughter has my husband’s last name (but has 2 first names and my maiden name is her “middle” name). But if we had a funny blog name I’d be happy to be “mrs. Funnyblogname. Lol!

Mrs Mustache can go by whatever name she chooses and doesn’t need to bow to the dictates of people outside her family to determine her name, honestly. An attempt at humour that further emphasizes the oppression of women to assume that she did not freely and proudly choose to be known as the wife to her husband. Women can have it any way they want it! Go Mrs Mustache and hold onto ur monicker!!!!

To assume that one person flourishes only if another is impoverished is a very simple kind of poverty consciousness that assumes that there is not enough in the world. There is enough and we can use our resources to not only be active politically to choose those who will stand up for more equity in opportunity but also we are actually in a better position to use our increased resources to help shift physical and financial resources to those who need it (see hope water project). However your story is a good reminder that we need to be aware of the needs of others and have a philanthropic heart (Bill n Melinda Gates).

Even though I’m all the way from South Africa, I follow your advice to almost religious proportion because it resonates so deeply with my own thought patterns.

I have to say the times (and place – USA) in which you started making money seems to be nothing short of excellent for your long term goal of early retirement and at first glance it seems unfair. At the end of the day you have/had friends that were banking the same and even more but they’re probably not debt free or retired. Your early retirement can only be commended to your inspiring ability to discern your wants from your needs.

Thank you for parading around in your well laundered monetary underwear. As I chip away at my student loan and rapidly dwindling credit card debt, I am confident that in the next 18 months (before my 27th birthday) I will be debt free and and my underwear won’t look so bad either. My early retirement plan will be attacked with nothing more than extreme aggression.

You are right, I was born in a good time for nerds. In the olden days (i.e., any time before the mid 1990s), computer engineers used to get jobs at Bell Labs or Northern Telecom and work for $40-$50k salaries for decades, diligently inventing all the technology that forms the base of what we use today, and thinking they had it pretty good. Those same people would be paid 3-4x that amount today.

On the other hand, I was NOT born in the USA, the ultimate Early Retirement country. I was born and raised in Canada, and I specifically made the jump to this country, in part because I learned about the drastically higher pay and lower taxes that were available at the time (1999). It was actually pretty difficult to move, leaving behind family and going through years of paperwork and legal hoops to get a series of work permits, and this year at last, full US citizenship. So, that part involves a bit less luck.

To answer Fab’s question about income taxes: When I left Canada, US total income taxes for my salary were about 20% lower. Then Canada dropped its tax rates quite a bit so they were nearly equal. Then the US dropped its taxes a bunch too. So I am not sure of the exact difference right now. I can say, however, that I am always surprised at how LOW the tax burden was even on high income earners like myself. It’s nice, and one of the lowest in the developed world, which is why I once wrote an article saying we middle class people should not complain that our taxes are too high!

Getting back to the point – Mrs. M. and I earned completely average software engineering salaries throughout our careers (and salaries for those jobs are even higher now). So if there is anything to be amazed about, it is not how quickly we retired, it is the fact that ALL engineers and other high-paid workers are not financially independent by their early 30s. That was originally the main purpose of this blog – to encourage high income earners to stop complaining and start saving 75% of their income. But the same tricks are of course needed even more by much lower income earners, to get ahead too.

I just looked through my detailed records and at the end of Year 4 (a couple months ago) I had $140k, pretty comparable to your $150k.

It seems like it took so long and so much hard work to get there that I can’t imagine ever having enough for early retirement, but your detailed timeline helped motivate me even further. Thanks for posting this!

Nice expose Mr. Stash. I was an IT guy thru the glory days of the 90s and these were infact the glory days. Its a much different industry today. You, like I, did the right thing and seperated wants from needs. I worked with many who did not, and were absolutely hammered in the downturn. The best thing I ever did was expose my kids to this truth, and they are benefiting from the needs vs wants knowledge. Nothing wrong with the occasional treat, unless the occasional treat becomes a daily need.

wow. you put my earnings increases to shame! Although in 4 years at one company (and one merger) I’ve gone from 40k to 63k.
How many times did you switch jobs? And what percentage of your investments are in retirement accounts vs taxable? It sounds like you currently “freelance” (work when you want to) for income, so you don’t touch retirement accounts? Or have you looked into substantially equal periodic payments exclusions?

Two job switches (so 3 jobs in total). Retirement accounts are about 20%, all the rest is in the form of paid-off main and rental houses, and non-retirement accounts. As mentioned in the article, even one rental house pays all the bills, so everything else is just safety margin.

Thank you very much for sharing this, it is very inspiring to see your progress! It seemed kind of daunting that you were already retired at 30 (by my calculations I might be able to do so by 40) but the progress makes it seem much more feasible now. And I forget sometimes that I’ve only just started working at 26 :)

This is frugality & personal finance porn. I think I’ve read this post about 10 times already.

As someone with both high income and savings, a relative rarity, it’s great to see details and numbers from someone who’s taken a similar path. It gives some perspective on things beyond the spreadsheets I normally stare at – I now have something to challenge myself with.

Seeing just how quickly you went from 600k (my former retirement goal) to 800k is great. How did you set a target for what your “number” was? It seems that you could have stopped working a year or two earlier, given your expenses.

Thank you very much.. it is a great honor to have my work in any area of life considered “Porn” !! :-)

As for the target – we always had the goal “600k plus a paid-off house”, thinking we’d need almost $40k of spending money per year in retirement. But as the years go by, spending less becomes more fun and easy and satisfying.. so we now only need $24k per year, even with a kid in the mix. We over-saved. But I enjoyed the job at the time, so I definitely didn’t suffer for it.

I will need to refer back to this article consistently to gauge my progress once i’m finished with grad school. My earning potential upon graduation should be $120K, but after taxes according to 2011 figures (22.7% federal, 7.85% state, 6.2% fica = 36.75%) nets me ~$76k.

Sounds like a good plan, Tommy! But I have some good news for you regarding taxes – they will be much lower than you expect!!
– start by slicing off the first 16,500 of your income each year TAX-FREE for 401(k) contributions
– add still more tax-free income since you might get some EMPLOYER MATCHING
– if you have a primary residence with a mortgage, you may be able to deduct mortgage interest
– if you get a rental house or two, you get to claim depreciation on them which will cut your tax burden still further!
– remember that as soon as you get any money accumulated, it will start gaining on itself, probably tax-free in the form of unrealized capital gains. You will also get dividends and/or rental income, which are taxable, but that will still boost your income and savings.

And finally, if you marry an ambitious lady as I did, you can add almost 100% of her salary to your mutual annual savings too!

You will probably beat my numbers, once you get out of the starting gate and start racing!!

A tip at TipTheWeb, eh? I haven’t heard of this service, but thanks! I will have to look this up.

Consider yourself lucky. I have twice your amount of student debt, and I currently am only guaranteed salary of around $70K. Technically, my earning potential will increase every year, but it is going to be rough and slow going these first years out of school paying off student loans, not to mention saving for retirement :(

MMM, thank you for your concrete examples and tips regarding growing that Stash! I am horribly single however, so unless I gets me a rich sugar daddy, this plan might not work so well….

The most impressive thing about this post is the house photo. Damn that’s a beautiful staircase!

Like MMM said, it’s an attitude thing, not a numbers thing. I’m 37, average salary, and I have enough passive income from rental properties to cover my expenses and then some. I still like to do things myself and I live in a $50k paid-for house. I save 80% of my income and cannot possibly fathom how someone could spend all their $60k income and think they are just scraping by.

My friends have $500k houses, shiny cars, around the world vacations and are less happy than I am. They always have their eye on some shinier car or fancier private school for the youngins.

I have fun constantly riding bikes, motorcycling in the mountains, vacations all around the western US, eat out a few times a month, drink beer, cook great food at home, socialize, etc and still maintain my 20%/80% spending/savings ratio. It’s just not hard to do and not a sacrifice at all if your mindset is right.

Dude, badass piece of literary art you just laid down on paper! Thanks for throwing it all out there like that. I’ve been wondering “how you did it” lately myself. I’m on a similar path to you, but probably somewhere around year 4 in comparison to you. It’s inspiring to see someone who’s actually done it. My wife and I have been savers for the last few years but not really living a frugal lifestyle. Can’t wait to make some changes and get my wife even more on board-I hope. I’ve read everything on your blog and look forward to more. Keep up the good work!

I am a female with an advanced degree, aged in my 40s, who has lived a somewhat similar life, only without marriage and children (I thus pay more to live because I live alone but also pay less to live because I don’t have a child.) My job requires my advanced degree; I need the degree to get the license from the state to do the job.

A few things struck my in your post:

1. Why did your wife make less than you even with similar education? This was depressing to me.

2. I liked how you negotiated the 4-day week even before you had a child. Some employers might question why you would need this; I recall Marc Vachon had done the same thing, though, so apparently you can get this.

3. Is $600K plus an owned house really enough to get you to, and through, retirement? What about (a) the cost of your child’s higher ed and (b) the cost of any additional child (apparently you’re not going to do this, but some people might want two children) (c) health risks (on or more of you could end up with a chronic health condition or disability that is expensive to treat and that may add other costs to your living expenses) and (c) problems with inflation and taxes (I gather you are diversified in real estate and stocks, but at some point you will need to buy bonds to avoid the volatility of stocks and the rates of return on bonds may not be high enough to provide you with any income above inflation + taxes). It sounds like for now the rental income on the extra house is covering your living expense, but you are not contributing to the principal you will need to form the base for your income later on?

It is impressive and heartening, however, to hear that a family of 3 can live on 30 to 40K. I gather you don’t travel much any more?

Very interesting question about the salaries! My wife had a higher starting salary than me in the first couple of years, but a lower peak. Why? We just discussed it over breakfast, and here is what she came up with:
– different education:I graduated from Computer Engineering, she has a Commerce degree with Managament and Information Systems specialty. Engineers get paid more because they had to suffer through more awful calculus :-)

– different company: I worked for a big company that was the almost the richest in the world at the time, she chose a start-up. And the management at her company was somewhat clueless about retaining good people at the time too.

– job switching: I got a big salary boost for each of my two job switches. She did not switch jobs

– epilogue: Mrs. M. was actually a brilliant worker at her job. After she quit and we had our son, a new and more with-it manager took over her department. This person called her and begged her to come back – for a salary that was even higher than my peak earnings at my job. She said no, because the incredible money wasn’t worth having to leave our role as full-time parents. Mrs. M. Rocks!!

Yes, 600k plus a house is plenty to go through retirement, because we have lots of luxury packed into our lives. We travel 2-3 months out of the year! If you have a shortage, you can always spend less for a while. All of my assets will increase with inflation, because none of it is held in cash.

We have health insurance (and Health!), and a huge safety margin in all of these calculations, so medical costs will not be an issue. And I’m not even touching the principal of our savings – even if we didn’t do part-time work this would be true.

I get the sense the reason you are able to do this without touching principal is because of the rental house? Without the income from that, it would be difficult to make your 30-40K nut?

One reason I ask is because I actually have about twice what you do in savings (more years of work and investing – I am a few years older), but I do not get enough return on my investments yet to stop work (even if I wanted to – I actually enjoy working). I invest fairly aggressively (about 85% in stocks, 15% in bonds and I also have a modest mortgage on my house because I can get a better return even after tax in the stock market on the money I would otherwise have locked up in house equity. My annual interest and dividends are only about 22K (and a lot of that is locked up in tax-sheltered retirement accounts), which would not be enough to cover the nut, especially any inflation in the nut in coming years. I am invested in tax-advantaged indexed mutual funds so that is part of the reason I’m not earning much return; in other words, I am deferring as much return as possible to capital gains and also deferring recognizing gain at all as much as possible by just letting my investments appreciate. If I invested in stocks/bonds with higher current return, though, I suspect the principal would not appreciate enough to allow my return to increase each year enough to cover inflation plus taxes on the return.

In other words, how are you getting $30-40K in return on $600K in principal while that principal is appreciating in value enough to beat inflation?

And I am also curious how a family of 3 is able to travel 2-3 months per year but only spend 30-40K per year?

He had a post where he covered some of his travel tips. These include driving and sleeping in a van to get somewhere (I believe he was traveling alone on this occasion) and renting out his house while they are gone. That way, they do pay some to stay in places where they travel (and may try to rent someone’s home), but they also have income by renting out their own house. He made money on his last vacation.

Sorry for the confusion – I guess I was assuming that you had read all the earlier articles.. but looking back, I see there are more than 100 now, and it is unlikely that most people will be interested enough to read them all, let alone carefully study each detail. So I will be more careful to include reference links and repeat key points more often.

I added a few reference links to this article to get myself more into that habit.

First of all, we only spend an estimated $22k per year these days, not $30-40k – because the house is paid off. We could afford to spend more, but it would just become excessive, since we live quite extravagantly as it is – you should see my house and my bicycle fleet!

The rental house earns about $24k after expenses. Plus its principal (the house itself) automatically goes up with inflation in general. But eventually I will sell this house (a single family luxury house), and perhaps swap it for a 2-4 unit multiplex of the same value (about 500k), which will actually bring in $30-40k in rent!

This article’s story ends a few years ago – at retirement. Since then we have accidentally accrued far more savings, because there was so much safety margin in all of my original calculations, and because as you say, work is fun!

You are right – with $600k in pure S&P500 index funds or similar, I would have had to eat into the principal by selling shares, (or the Mrs. and I would have to earn $5000 each per year or reduce spending) since the dividends on that amount at the current 2% are only about $12,000 per year. And with the stock market not growing for over 10 years, my savings would have declined slightly if I did not work or decrease spending. On the other hand, there will be future 10-year periods where a $600k investment in the stock market will increase by $60,000 per year! One of these, followed by near-zero returns indefinitely and dividends alone, would get our hypothetical investor through the rest of her life!

And don’t forget Social Security!

Regarding travel – we like to travel by road, to do things like camp, hike, bike, and kayak. We often stay with family or friends. And stay in nice hotels when fun camping is not nearby. We buy most food in grocery stores on these trips, unless a luxurious restaurant meal strikes our fancy – we just do whatever seems like the most fun at the moment. Our idea of fun never involves valet parking or bellboys or people holding out a bottle of $300 wine so you can sniff it before they pour it for you. We went on a big fancy Caribbean cruise last year, and while I enjoyed the boat and the food, it was a grotesque consumer experience we have no desire to repeat.

Sometimes for longer trips I rent out our primary house, which earns more money than we can even spend on a trip!

Your main question seems to be on how to get a nice stable cashflow on a large chunk of savings. I like the rental house option, but if that doesn’t sound like fun, you could put some cash into a 6-7% REIT as mentioned in an earlier article, or the Vanguard Long-term Bond fund that pays 4%, or a life-cycle fund, or some higher-dividend stocks like beaten-down banks or utilities, or just consciously sell of some of your actual shares each year. Stock market appreciation WILL resume eventually, you know!

MMM – I’m amused that you went on a cruise. Not because I am necessarily opposed to them, but because it seems so uncharacteristic of you. My wife and 2 children (ages 2 and younger) and I recently cruised. As we stepped on board and entered the dining buffet I asked myself what Money Mustache would think of this. And then out loud I told my wife I won’t let MMM ruin this trip for me. Is it excessive and wasteful in almost every way – yes. But the only way for me to be even more wasteful would be to not enjoy such luxuries with my family once on board. And it helped of course that we only had to pay taxes as the cruise fare was gifted to us.

I’ve seen “MMM” dropped around a lot lately, so I finally came by to see what it was all about. I love it!

My story is almost identical to yours. I graduated with a computer engineeering degree a semester early, skipped graduation, and went to work (in 2000). I saved a lot more aggressively early, but I didn’t have as good of returns in the market, so after 9 years I had the same amount of savings.

This is where our paths diverge (sigh). Now I’m at 11 years with roughly $1M and ready to retire. Unfortunately I took a job with a very large signing bonus and am forced to stay here for 20 more months. At that point, on that day, I will retire.

I like that you moved to a 4-day work week at 20% pay cut. How did you go about proposing it?

Wow! A harder-working version of Mr. Money Mustache! Nice to meet you, Brave New Life.

I just checked out your blog – It sounds like you will have a very cushy retirement in exchange for those few years you worked longer than me.

Negotiating the pay cut was pretty easy:
MMM: “How about I work 4 days per week and you pay me 20% less? Studies show people produce almost as much work even with 4-day workweeks!”
Boss: “Hmm.. that’s not official company policy, but I’ll guess we’ll have to make an exception for you, since you do all this important work for us”
MMM: “Cool.”

I was reading more of your blog and just thinking, I’ll bet he worked at the same large computer company as me… But then I thought, no way, I was as valued as it gets there and there was no way they were letting me work 80%. In fact ,when my wife (who worked at the same company) requested part time work after our first kid she was whole-heartedly rejected. So she quit and never looked back. Lucky her.

I’ve since switched jobs and moved cities, and I’m considering proposing a part-time position once I build a few more months of reputation.

I see Pete never replied here, and you may have heard this before, but the general wisdom is that if your Boss’s alternative to allowing you to work part-time is to watch you waltz out the door, said Boss might just come around to the benefits of holding on to you 80% of the time. Of course, I presume you scoured the contract and found that you had signed an agreement to work full time.

New subscriber. Just wanted to say how inspiring this was and its good to see kindred spirits

Like Brave New Life the story is almost identical. Child of the tech boom and fortunate to participate in the upside but was conservative and saved. Wife but no kids so my savings were a bit more than the MMM’s.

Now to ND’s question; wife and I also travel 2 – 3 months a year but spend very little. I have a part time “job” reviewing skis, bikes and places to travel with skis and bikes. It means that travel costs are highly defrayed. On a per hour basis it pays very little but it gives great satisfaction & it appeals to my sensibility of getting something out of perhaps nothing. Our expenses are about 3k a month so that doesn’t seem totally out of line (no debt yada yada) so that’s basically discretionary expenses.

So to add one thing to MMM’s excellent blog which might not have been covered; look at your biggest expenses and see if you can somehow work out an angle to reduce them without chopping into too much of personal enjoyment

This comment is so hopelessly complainypants that I just had to approve it even though everything it says is already discredited in the article. Just for the amusement of your fellow readers :-)

If you know anything about dividend-producing stocks or rental houses or other assets, you know that on average they track inflation – so if your income depends on them, your income will rise with inflation as well. To protect against anomalies, you allow a safety margin in this factor as well.

If I were “a couple of mil off”, I’d have a little over $3 million at this point. Even with only a 4% dividend, this would throw off $120,000 of inflation-adjusting income, forever. FIVE TIMES WHAT I AM SPENDING!!! If I continued to spend at my current luxurious $24,000 level, and left the other $106k to compound into the 4% dividend assets, I would end up with $8.6 MILLION INFLATION-ADJUSTED DOLLARS even by the time I reach the youthful, still-running-marathons age of 65, and it would go up rapidly from there.

I have been reading this blog for just a few weeks now… I struggle with the high dividend stock part everyone keeps saying Vanguard funds…they seem to not have as great of dividend returns as many other stock/ETFs. Mine average 14% in dividend that doesn’t include actual stock price change. I don’t see how you are getting 8% dividend out of Vanguard last 10 years shows about 4% unless you are included actual stock price change in your calculation. I am no pro at this and just trying to understand the numbers better BC I AM TIRED OF WORKING 8/5… maybe there is blog I have missed

Yes, you definitely include price appreciation as part of your investment return calculations. Many companies (and Vanguard funds) minimize actual dividend payouts and focus on appreciation instead, partly because this is more tax-efficient.

Where are you getting 14% dividends? I have only seen that in companies in extremely precarious positions (like Telefonica SA in 2010 – they survived but only with a 60% cut in stock price and dividends yield.

Ok makes sense now. There are actually quite a few mine are all 7%- 18% some leveraged some not . Some even pay monthly. Current mix Domestic 23% international 35% bonds 7% rest other. Only have 45k invested so it will be a while before I can retire early…

What a thoughtless comment. It’s easy to take care of that scenario by limiting your deposits to whatever is covered by FDIC or CIPF – if US or Canada. And if you wanted to be ultra-conservative sock it all away in TIPS or RRIs. If the US or Canadian governments default then I’d imagine all of us would have big problems.

If you’re going to troll out of jealousy – at least come up with something somewhat intelligent.

Thanks for chiming in Lee, but I actually get quite a few meaningless troll comments these days. Usually I just delete them, but occasionally I publish them just to throw in a joke about tinfoil hats or some other tomfoolery.

So when you see them, readers, don’t get upset or take them seriously – just think up ever-more outrageous comebacks. They are here for our amusement :-)

Sorry I bit on that one. I got tired of explaining to people that I retired early by being cheap because they would look at me like I did something unholy like run pornsites, or stuff a mortgage-backed security with bad loans and peddle it to clients to whom I lied so I’d just tell them that it was pure luck. Usually it was people like Cris. You know, “I can’t do it and I’m smart so if you’re able to do it then you must be either kidding yourself or cooking some books”.

Haha.. very nice follow-up punch, Gerard! And I see Erica visited this old thread and threw in some niceness too. Ahh, the comments section.. endless entertainment to be had here.

I’m going to to on record with another outrageous prediction:

One more year from now, the US/Canada/World economic system will still be cranking out wealth, prosperity, and far too much pollution. I’ll still be retired, and although the Mustachian movement will be much larger, the world will still be a frustrating place of overconsumption with much work remaining to be done.

Halfway there, and so far you’re right! :-D (Husband was asking questions about investments and early retirement tonight, so I went looking for some “best of MMM” posts to have him read, and saw this, and nearly posted an identical comment before I saw Gerard’s.)

This is really inspiring! I’m in my early 20’s, and I’m a full-time volunteer at a charity. I really enjoy the work, but I feel that I could be supporting myself, instead of having to ask others to support me. So I hope to learn lots more from your blog, for when I go down the road of savings and investments.

I graduated from university at 21 and have been working for almost 2 years now. I’ve always been a saver – back when I worked minimum wage in high school, I saved 80% of my net income (I counted allowance as income) and spent 20%. I’m not doing quite that well now, but that would be pretty difficult considering that I’m no longer living at my parents’ house! I’m saving about 65% on average for the year, but I’m only spending $36,000 despite grossing well over $100,000. I do live by myself, but I made that decision when I finished school for my own mental sanity and I think it is definitely worth the added cost.

I’m starting to see my investments and savings grow now and it’s really cool to look at how tiny my 401(k) balance was last year, but how it’s grown this year! It’s really cool to see how things are growing and fun to make spreadsheets for how things could continue to grow over the next few years. If I stay at my current job, I could very likely save $420,000 before I’m 30, for a total net worth of just over $500,000 ignoring any investment gains.

I think the biggest tell will be when and where I choose to buy a house or a condo, because otherwise I will continue accumulating boatloads of cash with the intention of buying a house at some point, rather than equity in a house, when I’m paying over $1,000 each month in rent. Although I suppose it wouldn’t be completely bad to buy one in cash eventually since it’s important to buy a house or a condo at the point when I am psychologically ready for it, not just financially ready.

its just as relevant to someone at 60 as it is to someone at 20. My husband is 65 and I’m 61 and we got the money thing all wrong in our earlier life. Now we are on stream as it were and are making great strides. At 60 one is only half way through one’s adult life (40 years gone and 40 to go) and the thought of having to live on government handouts for the next 35 years doesn’t sit well with us. If we can put it together well over the next 5 – 10 years then we will have a much more comfortable time in our old age. So don’t just market this to young people.

May I ask how the 800K+/- is divided i.e. 401K, cash savings, home equity?

I’m just wondering about cashflow, since I’m wondering how one lives off 401K gains given we can’t touch them until 59.5? Also, interest rates are so low, it seems difficult to earn a living off $800,000, even if it was 100% in cash, CDs, or other income yielding assets at 4% for example.

I agree with Financial Samuai. I would love to see how you distribute your funds (if you don’t mind, of course!). Just started working and trying to decide how much to put into my 401k vs. keep in taxable accounts. Should I try to max it out? If so, what do I do for cash flow before I hit 65? Thanks!

Yes, I’d suggest you still max out your 401k each year if you are a higher income earner (over 60k), just because the annual limit is a small enough number that you can still save plenty after tax as well – and the tax benefits are more worthwhile at higher income rates.

My own savings strategy was always to maximize the 401k, and put the rest about 50/50 into real estate (including paying off my own house) and Vanguard index funds. More recently I reduced the stock holdings more in favor of rental real estate, so it might be 20% 401k, 10% taxable stock accounts, 70% real estate right now. But this is not a scientific or good model I’d encourage others to follow. My ideal allocation for myself in the next few years would be more like 50% stocks (dividend-heavy for income), 50% real estate. Others might focus only on mixing stocks and bonds.

I Just graduated college in May of 2015 and have been working at my current job since October 1st. After taxes, I’m bringing in about $44,500 a year (3580 a month and a year end bonus). I’ve got a great situation at the moment. I pay my grandparents $50 a month for rent, I get 2 free meals a day at work, and my company reimburses my gas. My only regular expenses are car and health insurance and rent. That all adds up to about $275 a month. My goal is to save about $2500-3000 a month. (I’ve been averaging closer to 3000). I started with no debt and about $2000 in savings. After 2 and a half months, I have $9000 in savings. Until next month, I’m not eligible for 401k contributions and my employer doesn’t guarantee matching. They match when the company meets the sales goal they set for themselves at the beginning of each year. Should I max out my contribution, or allocate most of my savings towards index funds. I should mention I also plan to buy a small house within the next year and rent out any extra rooms to pay my mortgage or even profit from it. I figure keeping as much of my money in a vanguard account until I’m ready to purchase would benefit me the most. I’m only 22 though and only recently have I begun to understand how a 401k works lol I would love some advice from someone who clearly knows what they’re doing. What other advice could you offer me as I move forward?

Mate, about what percentage of after tax income were you saving? Going from $490,000 to $600,000 is a nice $110,000 in savings in one year… needing some $170,000 or so in gross income to save. But, if your income is $125,000 and hers is $90,000… how do you save this?

I think the savings rate was in the 65-70% range in most years. Remember that from year-to-year, the overall savings balance represents some investment gains in the principal as well – stock dividends and appreciation.

You might also be overestimating taxes – remember the mortgage interest deduction, as well as a maximum 401k/IRA deduction for each income earner. Factoring those in, you don’t need $170k of income to save $110k, and that is before even accounting for the tax-free capital appreciation of stocks as mentioned above.

Don’t get too hung up on the exact numbers in any particular year, because I pulled this whole article out of old memories – I didn’t start my current “net worth” spreadsheet until around 2005. The salary numbers and dates are exact, as is the retirement date and the 800k ‘ish balance at that date. So I know I got there somehow. The years in between are just my best estimate.

The bottom line is that we earned some solid average office-worker salaries at the time, but only spent $30-40k per year. Which is still a shitload of money for two people with no kids at the time to spend. Easy!

It was interesting to read your journey, and I agree frugality is a mind set. My husband and I got married in 1999 when he was in his 2nd year of college and I was just starting a graduate degree in Family Relations and Child Development. He majored in Geography and does GIS work (computerized mapping.) He is now making about 50K, but LOVES his work and works 4 10-hour days. He started under 30K once he graduated in 2002. We have 8 kids at home (2 adopted) and one older daughter adopted from foster care as a teen who is now married. I stay home with the kids and homeschool them.

With that income and number of kids, and me not working, we have still been able to save and stash. We have 2 rentals, one we outgrew and a foreclosure we bought and fixed up. Our house was a shortsale, that took elbow grease. I use YNAB for our budget and we spend wisely, but we have a great life that is focused on our family and doing fun things with them. No CC, no car payments. . . .

These principles work, whether you make 100K with one kid or 50K with 8 kids. It may take longer to hit financial independence, but we’re still moving that direction. And teaching the next generation these concepts.

Janet, if only you had the time to share your story too! I think so many readers get caught up in the idea that in order to reach early retirement they must choose to have very few kids (2 tops). With you having more kids than I can count on one hand, and still working towards this goal, I’m inspired all the greater. Thanks for sharing!

I just discovered your blog in December and have been obsessed about early retirement since then! I had a few questions about your ‘stache though. For the part about home equity, did you actually take out a line of credit against your home equity and invest it, or are you just referring to the equity you have in your home due to down payment/mortgage payments?

Anyway, right now I am in law school and I am trying to develop a “plan” of how I want to manage my life/ career afterwards. I have about 60k saved in retirement accounts from working before grad school (I was paid very well, but living in nyc so wasted a ton of money) — but with three years of being in school, hopefully I can still keep up with your savings plan! I will be starting work again with a very high salary, so I am using your principles to practice frugality before working again so I won’t blow through all the money once I have it. I’m finding it hard though to figure out how to make your lifestyle work for me though b/c I’ll be in Northern California, where housing prices are so insanely expensive!

For my semi-retirement job, I am interested in pursuing real estate like Mrs. Money Mustache though =) Was it easier for you to get started with the real estate business b/c you had some money saved up? I heard that b/c the income is very erratic and not steady, it’s best to only start with the job when you don’t need the income.

Also, I have another question for the Mrs. How do you save money on personal things like beauty/grooming expenses or like skincare? I find that I spend a good amount of money on skincare/cosmetics, threading, etc. I think it’d be helpful for the women who read the blog to have something about that (unless there was already a post I missed!)

I think you should develop more on the subject of which investments you made. It does make a huge difference. When you were using real estate to make money, you were no longer using only your savings to make money but other people’s savings as well in the form of debt. This is the only form of good debt there is. Especially in Canada where interest is non deductible for personal property. Having a mortgage on your own home becomes a mistake when you could have someone else pay for your home and have the interest be deductible while it is being paid off. Also using leverage as an investment tool is very powerful when you live frugally and are responsible enough to save the added gains which protects you against rising borrowing costs. It’s worthy to note that I do not make more money when I pay down the mortgages of my income properties because the debt is making 3% over my borrowing cost, and 3% happens to be my borrowing cost. THe only benefit is risk reduction and as long as borrowing costs remain the same I am better off investing excess cash into investments yielding more than 3% which many dividend paying companies do at the moment.

Also worth noting is that CCA (capital cost allowance) can turn rental income into untaxed income which will only be taxed if you sell the income property. This allows me to stay in a low tax bracket which gives me all sorts of benefits when it comes to income deductions and HST recapture. As well as making my dividend income tax negative by 3%. Because in Ontario, all dividends from Canadian Corporation give a credit of roughly 24% when the first tax bracket is 21%. I use these techniques and paid 0$ of tax on 75k of income in 2011. And will likely be paying 0$ for a few more years even if my income grows through investment. Normally a person would have to make over 100K to take in 75K after taxes.

Wonderful. I was wondering where you got that house your renting. Great story. Bravo.

I’ve been saying anyone can retire at 40 in the USA, but now it’s 30. Virtually everything can be free here. The public library is a wonderful resource. And in and around cities, public transportation is BETTER than owning a car. One can also rent a car cheaply when truly necessary.

You ever read into indexed universal life insurance as a retirement vehicle? That’s what I’m planning to use moving forward (after maxing out my Roth) – Patrick Kelly has a really good, really short book called Tax-Free Retirement on how it works.

How do you have health insurance by no longer working? My biggest fear of early retirement would be the gap in health insurance because the US lacks a socialized system. Tying health insurance to people job effectively handcuffs many people into working.

I make less than him a year, do not have a wife, and live in an expensive area of the country. I have managed to save plenty in my first year of working. I don’t know your situation, but I for one can see it is possible!

I am currently in oil country, where housing prices are inflated beyond reason. It is almost dangerous to buy, because if oil crashes, people will move, and housing prices will drop 100k +, almost overnight. So i was thinking about putting down payment money in a condo in a vacation area, and paying a management company to watch it. Is that a smart strategy? Do you have anything against renting out property long-distance?

I ran into your blog and so glad that I have. It has changed my life and my outlook on how to spend my income and what I should spend it on. I can relate to your story with a similar education background and career growth in the tech sector. But unlike you I have nothing to show for the past 7 years of work even though me and the wife take home a similar paycheck as the MMM family did in the final stashing years. I have around 50k of net worth after 7 years of gainful employment. I am now addicted to your blog and trying to implement it everyday in my life. I have vowed to retire in 9 years starting June 2013. Exciting times ahead.

Your comment is especially valuable, because when this article makes its rounds on the internet, people often focus on the higher-than-average salaries and say, “Yeah, well it must be EASY if you make this much! Try doing it on minimum wage with eight kids!”, or similar.

That’s not really the point – here I’m showing that if you do have a higher income, it is easy to get ahead. In other posts, we cover how to do the same thing with lower incomes.. it just takes more time and badassity to achieve.

Sometimes on boards that link here, people say the the MMM experience was lightning in a bottle and can’t be done by others – that he is a superman or financial genius.

I looked back in my records and was shocked that despite HUGE differences between MMM’s life and mine, setting my year zero= first job above minimum wage-ish level gave a result that our stash levels were within 5% at years 9-10.

A short list of some of the differences in our lives: I’m much older, made less money than MMM, wife made less than Mrs. MM, I’m not a good investor and haven’t done any real estate deals, I had school loan debt, I always have had cable, I don’t have a bike, we take yearly vacations, we eat out at restaurants several times/wk, and I lost all the ammunition to my optimism cannon in my twenties.

But…

I worked rehabbing a house with a man that would make MMM’s life look flamboyant in my late 20’s. I learned alot (although I earned about $1/hr working with him when all was done!). Also read and reread and reread the Millionaire Next Door while making (roughly) minimum wage. Made some promises to myself about how I would treat money if I was ever able to break through the lower economic class. Part of that promise was that I would not deprive myself of things I enjoy (hence the cable, vacations, and restaurants) and part was that I would not waste money on things that I don’t (swimming pools, private airplanes, maids, limos, garden gnomes, pinky rings, designer crap to wear, whatever the Jones have on display, and whatever other things that people with huge incomes of $30K+/yr tend to spew money on).

So we have many differences, but one similarity. And that one similarity of spending less than income was enough to overcome all the differences between our lives to bring the 10 year stash levels to within engineering accuracy (5%)! Amazing!

Hey James.. yes – she showed up in the US with no savings, but at that point in year 4 we both contributed jointly to the effort, so everything started growing faster. On the other hand, the added expense of a house showed up that year, and we had two cars. So a single person could still reach retirement almost as fast.

Also, it seems like when you retired in 2007, your net worth was heavily invested in both the S&P 500 and real estate, both of which took monster dives shortly thereafter. At least that’s what I gather from your notes.

Assuming this was the case, did your withdrawal rate change during this period? Or was it merely unrealized losses that recovered and did not affect your day-to-day? I know you have written before about spending less during recessions.

It seems like you inadvertently made a great play by putting most of your net worth (at the time) into a house before the dot-com bubble burst, and then reaped the capital gains rewards in the following years. High-five to past Mr. Money Mustache.

We definitely got a bit more frugal in 2005-2009.. not so much due to the asset prices since that doesn’t affect your rent and dividend income very much, but because I was a bonehead and had started this somewhat stressful house building company as my idea of a retirement hobby (ahh, the naievete of youth!) I wanted to keep spending low and savings high, just in case anything funny happened. And it did happen, burning off a good chunk of savings. Since that was closed down in 2009, things have been very relaxed.

Overall our good and bad luck regarding property and financial market timing has roughly canceled to neutral, which is still a very good place to be.

I just discovered your blog last week when I heard your appearance on NPR’s Marketplace Money podcast, and have been reading it incessantly. Congratulation on a fine job and keep it up!

I’ve always thought myself pretty sensible with money, but now realized I could be more frugal! Which I will do. But my most pressing question is, do you and should I include real estate equity, 401k, Roth in my ‘stash count? I ask this because these are savings that are not easily accessible, and the return they generate can not be used for daily expenses.

Which then logically means, I can only count on income generated from non-retirement savings to cover living expenses. So assuming $25k per year living expenses, using the 4% rule, I must have at least $500k in non-retirement savings before declaring financial independence, right?

Since no matter how much is stashed away in 401k and Roth, and how much returns are generated there, I can’t use those returns until I hit 65, and I’m only in my early 40s. Would really appreciate input from MMM and other users here!

I always count ALL equity, including houses, as part of net worth. Of course, the money tied up in your main house is not investment capital, but it still allows you to live without paying rent (aside from taxes and other upkeep).

As you read on, you’ll see that you just need to add up all your annual expenses and multiply them by 25 or 30. That’s your target for active investments (aside from home equity) that you need to generate enough to live on, more or less forever.

Thanks for the quick reply. I’ll read the linked piece and think about it more. Sorry to sound not entirely convinced, just yet, coz it just seems too good to be true! The difference between including or excluding 401k & Roth savings is a whooping $400k and 80% of my total net worth, meaning I’m either already ‘golden’ without trying too hard :D or completely toasted. So I’ll be hyperventilating a bit either way.

Also, even if I’ve already got enough in the ‘stash according to the MMM formula, being always financially conservative, I’m going to work a few more years to fatten the nest to $1million. Nowadays people think $1mil is nothing, but I’ll feel more secure that way and can stop worrying about working for money.

Again thanks so much for writing the blog, otherwise I’d be slaving away for another 2 decades not knowing it would be unnecessary! Why not start doing podcast too? I think you’d reach way more people that way, people who may not like reading blogs or don’t have cushy office jobs that allow them to slack off reading blogs :D. You can also have guests on, and have callers asking questions and having them answered. It would be somewhat like Marketplace Money, but with a much sharper focus on saving and reaching financial independence sooner!

Very inspiring. Thanks for sharing your story. It is always exciting and educating to hear people’s success stories. Sounds like real estate and renting out first house made a huge difference. Congrads.

Nice. Basically impossible in Australia unless you exploit loopholes in the system and become an entrepreneur.

The median wage per person is maybe $50-55k p/a gross, maybe $40-45k net (after taxes, levies, reductions etc). The average home in a capital city (where you need to live to earn a decent wage) is about $300-450k for in the outer suburbs (where there is no/limited public transport and you essentially need to own a car). If you want a house/unit in a better area you can expect to pay around $500-900k for it (plus taxes). A one bedroom apartment in a dingy, old complex but in a good area usually will sell for around $280-300k. Interest rates for home loans are around 6-8% depending on the length and type of loan.

Conversely if you rent a home the cost is of similar proportions, divided by 1000, per week. So a 1 bedroom apartment is around $250-300 per week, or a 3×1 old house in a reasonable area near a train line is around $400-500 per week. For a nice family size house (single story, 4×2) close to the city rent is around $800-1200 per week.

Even if you live with a bunch of friends in a good value share house, earn an above average wage and have an extremely frugal lifestyle you will be lucky to be able to save more than $35k per year.

Considering you need a 20% deposit for a house and the interest rate, it will usually take two or three years of hardcore saving just for a deposit and then you will be locked into a 30-year mortgage to pay it off. Of course it is a little easier if you are a couple and both earning a solid income, but this isn’t always the case.

Basically it’s close to impossible to be able to own your own home and also save enough money to retire early in Australia as the system is rigged. As I said at the start the only way around this is to rig the system yourself and/or become an entrepreneur.

One idea I have been bouncing around is a environmentally conscious land acquisition and development co-operative/collective organisation. If you can get, for example, three couples together with each couple contributing $150k to buy land, build communal/shared facilities, and then self-build a basic 2×1 cottage it will be far more affordable. The main downside is that to be able to make this work you need dedicated, motivated, like-minded people and also suitable land for acquisition and development which is not usually the case near capital cities (and capital cities is where all the work and money is, unless you are a well paid blogger or can work/generate income from home otherwise!).

The reason why our housing is so expensive in Australia is complicated. It’s mainly caused by the attitude of everyone who buys a house thinking about what it will sell for in the future, rather than not caring because they plan to live there indefinitely. Everyone expects their house to sell for a solid profit, and although this is a bubble-causing mindset the ever increasing demand for housing and increasing wages means that this boom isn’t going to hit reality any time soon. It also doesn’t help that most banks will refuse to give you a loan unless you are going to buy a suburban 4×2, because they don’t see the value (thus return on investment) on other housing stock. So if you wanted to get a $200k loan, even with a $100k deposit, to buy land in a co-op and build your own eco-dome house it would be next to impossible to get it.

Another potential idea is to keep living in a share house, save up as much money as possible for the next few years and hope that I have enough money to buy a house outright (with some cash left over) when the housing market eventually does crumble and return to affordable prices.

The median wage is just over $60K, which is what my husband earns, while I am at home with our three children.

We bought our house 9 years ago, so the price is irrelevant, but a friend recently bought a 3 bed house nearby for $252K. As in one month ago. This is average for Logan City, right next to Brisbane City.

My interest rate on my home loan is 5.16%. I could do better, but I like my particular bank. I can’t imagine how bad your credit would have to be to get an interest rate of 8%!

My parents are renting in a suburb of Brisbane for $470 per week. This is for a 3 bed, 2 story house with dual living, huge yard and nice shed.

Yes, you would want a 20% deposit on a house, only if you want to avoid paying lenders mortgage insurance. Otherwise, you can pay the one off fee and get a house on 5% deposit.

As for early retirement, my cousin retired at 35. Her husband doesn’t have to work, but chooses to. It depends on your determination. My mortgage is set to pay off in 21 years. If I throw all available funds at it, it will pay off in 6 years.

I think you are convincing yourself that it isn’t possible, so that you don’t feel bad for not trying. Anything you do will put you in a better position than you are today.

Let me share a quote that sort of sums this up:

“Those who say it cannot be done, shouldn’t interrupt those who are already doing it!”

Hah Angela, I was reading Karl’s comment and thinking exactly the same thing…

In this terrible Australia where the “system is rigged” my husband and I have managed to – over time – amass 3 positive cash flow rental properties (Angela, I see your Logan and raise you an Ipswich :) )and also a pretty decent whack in our superannuation (401Ks). This has involved determination and flexibility on our part – we don’t live where the cool kids do, and we understand the concept of delayed gratification and try to practice temperance with our spending – but we are friends with the cool kids and know they are doing it way tougher than us in terms of payday to payday.

We are by no means in the MMM situation of being retired yet and we have definitely made our share of mistakes, but we are probably half way there, and we have gotten there not by being entrepreneurs (we are both RNs by the way) or exploiting loopholes, but by doing what everyone else seems to be unwilling to do, spend less than we earn and save like maniacs.

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